Tuesday, December 13, 2011

It's important to remember that credit needs to be pulled twice for most mortgage transactions these days: once when the loan is pre-approved, and again right before the closing. If any new credit inquiries show up on the second credit report, then they have to be explained before the loan can close.

Many people apply for new credit cards at this time of year because of all the holiday shopping. Those credit inquiries will show up on a credit report.

If you have a question regarding new credit accounts and how that will affect your ability to close a loan, make sure you consult with your lender before opening any new accounts.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

If the loan amount is at or below the limits listed above, then the loan amount conforms to the Fannie Mae and Freddie Mac guidelines, and the interest rate will be cheaper than it would be for a jumbo loan (a loan amount greater than the limits listed above).

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Sunday, October 30, 2011

Ever wonder what the difference is between a mortgage banker and a mortgage broker? Today's winning question by Steve Jacobson of Metro Brokers addresses that issue. Steve receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Steve's question is: What are the differences between Mortgage Brokers and Mortgage Bankers. Should one be considered better than the other?

Here's the answer: The main difference between bankers and brokers is in the way they fund the loans they sell. Mortgage bankers fund the loans themselves - the money comes from their own credit line. Mortgage brokers, on the other hand, do not fund the loans themselves. Instead, they arrange for the money to be sent to the closing, but the money comes from the bank.

There are two types of mortgage bankers: retail and wholesale. Retail mortgage bankers have employees who get paid a salary and work only for them, and they only sell their own loans.

Wholesale mortgage bankers get paid on a commission-only basis, and they sell loans from many different banks.

Because retail mortgage bankers have salaries and other overhead to pay their employees, they generally have higher interest rates than wholesale mortgage bankers. Also, lenders offer wholesale bankers lower rates in order to entice them to sell their loans. If Wells Fargo and US Bank are two of the banks that a wholesale banker represents, then both Wells Fargo and US Bank have to offer that wholesale banker a cheaper interest rate than they offer their retail customers. It is the only way they can get the wholesale banker to sell their loans.

Mortgage brokers (the people who do not fund their own loans) have interest rates somewhere between retail bankers and wholesale bankers. They are cheaper than retail bankers, but not quite as cheap as wholesale bankers. That's because the wholesale bankers assume some of the risk for underwriting the loans they sell. In exchange for assuming that risk, the lenders give wholesale mortgage bankers lower rates. Since mortgage brokers only act as middlemen, and do not assume any risk, they don't get the same low rates that wholesale bankers get.

So here are the differences:

Retail mortgage banker:

Fund loans themselves

Can only sell loans from their own bank

Have the highest interest rates

Mortgage brokers:

Do not fund loans themselves - they only arrange for the funding

Can sell loans from many different banks

Have slightly lower interest rates than retail bankers

Wholesale mortgage bankers:

Fund loans themselves

Can sell loans from many different banks

Have the lowest interest rates

None of this is to say that you should always use a wholesale mortgage banker, just because they have the lowest interest rates. There are plenty of good retail mortgage bankers, plenty of good mortgage brokers, and plenty of good wholesale mortgage bankers. You should use a lender with whom you are comfortable. Yes, low interest rates are important, but using a lender who is knowledgeable and trusting that your lender is not ripping you off (as so many lenders do) is more important.

Just FYI, we are wholesale mortgage bankers: we represent many different banks, we fund loans ourselves, and we have the lowest rates. And we are certainly knowledgeable!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Wednesday, October 26, 2011

From now until October 20, 2012, The $100 HUD home sales incentive is back in Colorado. Here's how it works:

The offer price must be the full listing price.

The down payment requirement is only $100.

The financing must be an FHA mortgage.

The maximum loan amount cannot be more than 100% of the appraised value.

FHA loans have a 1% up-front mortgage insurance premium (UFMIP), which is typically included in the loan amount. However, since the maximum loan amount cannot be more than 100% of the appraised value, it seems like there will be a problem.

Well, there's not a problem. Here's why:

If the appraised value exceeds the offer price by more than 1%, then the UFMIP can be included in the loan amount and the total loan amount will still be less than 100% of the appraised value.

If the appraised value is less than 1% greater than the offer price, the UFMIP cannot be included in the loan amount. However, the lender is allowed to pay for the UFMIP. When we do $100 down deals like this, we pay for the UFMIP.

And that's another great reason to call us for your next mortgage!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Tuesday, October 18, 2011

People are always asking us about debt-to-income ratios. Here's what you need to know.

Each type of loan has a maximum allowable Debt-to-Income (DTI) ratio. However, if the loan is run through the automated underwriting software that is available from Fannie Mae, Freddie Mac, FHA, and VA, the maximum DTI ratios may be exceeded.

The DTI is calculated like this: Add all the monthly payments that show on the borrower’s credit report to the total monthly housing payment (principal, interest, taxes, insurance, mortgage insurance, and HOA fees). Then divide that number by the borrower’s gross monthly income (income before taxes).

The following table illustrates the maximum DTI ratios for both manual underwriting and automated underwriting (underwriting using the software):
﻿﻿﻿

Click image to enlarge

﻿﻿﻿ NOTES: Compensating factors are things that add strength to the borrower’s loan file. Some of the more common compensating factors include excellent credit, very high reserves (money in the bank), and a large down payment (20% or more).

Tuesday, October 11, 2011

A couple of weeks ago, we announced that VA funding fees were going down beginning October 1. However, Congress has since passed a bill that does not allow for the VA funding fees to be lowered.

So the bottom line is that VA funding fees remain unchanged. If they change in the future, we will be sure to let everyone know!

The VA funding fee is a fee that is charged to the borrower on VA loans. It is typically included in the loan amount.

If a borrower is receiving military disability payments, they are usually exempt from the funding fee completely.

Remember, VA loans are the best deal possible for vets, active military, and members of the Reserves or National Guard. There is no down payment, no mortgage insurance, and really low interest rates. VA loans are a benefit for people who have served our country. If a lender ever tries to talk someone out of a VA loan, it's probably because that lender is not approved to sell VA loans.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Friday, October 7, 2011

Why do investors have to wait 15 days before making an offer on a HomePath home? Today's winning question by Mike Bradley of Metro Brokers Eagleview Properties addresses that issue. Mike receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Mike's question is: When looking for bank-owned properties for investors, I often see a line in the MLS notes that says, "Available for HomePath financing...no investor offers accepted for 15 days." Why is that allowed?

Here's the answer: A HomePath home is a property that went into foreclosure and is now owned by Fannie Mae. For most of the homes they own, Fannie Mae has a special financing program called HomePath financing. No appraisal is required, no mortgage insurance is required, and the approval guidelines for condos are more relaxed than they are for non-HomePath condos.

Fannie Mae is run by the US government at the moment, and they are doing everything they can to make sure the foreclosure rate drops. Because rental properties have a much higher foreclosure rate than homes that are owned as primary residences, Fannie Mae would rather have the homes they sell be owner-occupied. To accomplish that, they will not accept offers from investors for a certain period of time after the house is listed for sale.

Although that policy may seem unfair to investors, it helps to keep the foreclosure rate a little bit lower, which is good for the entire housing industry.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Tuesday, October 4, 2011

When should you lock the interest rate? Today's winning question by Becky Gregory of Keller Williams Realty DTC addresses that issue. Becky receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Becky's question is: I often get questions regarding locking in a rate, especially when working with a new-build where the closing date is not set in stone when the contract is signed. It could be (and usually is) more than 30 days before the house is complete and good to close. When is the best time to lock in?

Here's the answer: Interest rates can be locked for different periods of time. Most lenders allow rates to be locked in increments of 15 days, for example, 15 days, 30 days, 45 days, and 60 days. The shorter the lock period, the cheaper it is to lock the loan. That means the loan originator gets a bigger rebate from the lender if they lock the rate for 15 days rather than 30 days, 30 days rather than 45 days, and 45 days rather than 60 days.

Also, some lenders will tell borrowers they know that rates are going to go up or down, but they are not telling the truth. No one knows when rates will go up or down. If someone knew where rates were going, they would not be selling mortgages. They would be trading bonds on Wall Street.

When a rate is locked, the person locking the rate (the loan originator) is making a commitment to the lender to deliver a closed loan to them within the rate lock period. If they don’t deliver the loan, they can be fined by the lender (sometimes thousands of dollars).

We always tell borrowers to lock the rate as soon as they know when the deal is going to close. Waiting is just gambling. Yes, the rate may go down if you wait, but it can also go up. If the rate goes up too much, some borrowers may no longer qualify for the loan, and then the deal will have to be cancelled.

In the case of new construction, the rate should be locked as soon as the builder can provide a firm completion date. If the house is not ready to occupy by the time the rate lock expires, the lock can always be extended, but that can get very expensive. The sales contract should state that the builder should pay for the lock extension if they go beyond the firm completion date. If the builder is unwilling to pay for a lock extension, then the date they gave as the firm completion date is probably not very firm at all, and the rate should not be locked until the builder can actually provide a firm completion date.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Tuesday, September 27, 2011

When can the appraisal be ordered? Today's winning question by Michele Fuxan Jones of Home Real Estate addresses that issue. Michele receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Michele's question is: I’m noticing that appraisal deadlines are moving ever closer to the closing date. Perhaps that’s advantageous for the buyer since it gives them another “out” late in the process. But it can be particularly nerve wracking for the seller. When can an appraisal be done and still meet current guidelines?

Here's the answer: Lenders are not allowed to charge for an appraisal until after the loan application is signed, but the new regulations don't define when the appraisal can be done.

It's always best to wait until the inspection has been completed before ordering the appraisal, however, because the appraiser needs to have a copy of the final contract before completing the appraisal report. Inspection issues often result in changes to the sales contract, and if the appraisal has already been ordered before the final contract is drawn up, delays are sure to occur.

Also, some deals fall apart completely after inspection. No buyer wants to pay for an appraisal on a house they're not going to buy.

The most important thing for buyers, sellers, and their real estate agents to keep in mind is that the sales contract does not really affect the underwriting process. The sales contract is between the buyer and the seller, and does not involve the lender. Good lenders always try to get loans approved as quickly as possible, but if an agent puts an unrealistic deadline date in a contract in the hopes of speeding up the lending process, they are most likely going to have to prepare an amendment to the contract to get the date changed.

If you're ever in doubt about what dates to enter in a contract, the best thing to do is ask the lender and use the dates the lender recommends.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Friday, September 23, 2011

VA funding fees are going DOWN! Beginning October 1, the funding fee for veterans who have less than a 5% down payment is going down from the current 2.15% of the loan amount to 1.4% of the loan amount.

For Reservists and members of the National Guard, the funding fee is going down from the current 2.4% to 1.65%.

The VA funding fee is a fee that is charged to the borrower on VA loans. It is typically included in the loan amount.

If a borrower is receiving military disability payments, they are usually exempt from the funding fee completely.

Remember, VA loans are the best deal possible for vets, active military, and members of the Reserves or National Guard. There is no down payment, no mortgage insurance, and really low interest rates. VA loans are a benefit for people who have served our country. If a lender ever tries to talk someone out of a VA loan, it's probably because that lender is not approved to sell VA loans.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Wednesday, September 14, 2011

What credit score do you need to get the best interest rates? Today's winning question by Marianna Schell of Cherry Creek Properties addresses that subject. Marianna receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Marianna's question is: As a buyer you can get the best interest rate if you have a good credit score. What is the lowest credit score necessary to get the best interest rate?

Here's the answer: For a conventional loan, a borrower needs a 740 credit score to get the lowest interest rates. For every 20 points lower than 740, Fannie Mae charges a fee, which in turn raises the interest rate (or lowers the credit the lender gives the borrower). The fee that Fannie Mae charges also depends on the size of the down payment, so it is impossible to say exactly how much the interest rate will go up, just by knowing the credit score.

For government loans (FHA and VA loans), everyone with a score above 660 gets the lowest interest rate. If the borrower’s score is between 640 and 660, they will pay a higher rate, and if the score is below a 640, they will pay the highest rate.

It’s also important to note that for conventional loans, the mortgage insurance payment gets higher as the scores go down. For FHA loans, mortgage insurance does not depend on credit scores. For VA loans, there is no mortgage insurance.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

From there, you can get to all the guidelines for income, assets, credit, etc.
Every time a lender says a borrower is pre-approved for a mortgage, they are supposed to have checked all of these guidelines. Very few lenders do it. In fact, very few lenders even know where to find the guidelines, so it is impossible for them to check.

In addition to these guidelines, a mortgage broker or banker needs to check the guidelines for the individual lender they intend to use, and then, if the loan will have mortgage insurance, they need to check the mortgage insurance underwriting guidelines.

Ever have a deal fall apart? Your lender didn't read the guidelines!

Have a question about the guidelines? Call us at 303-345-3683.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

• From the SORTED BY menu, select County
• Select the state
• From the LIMIT TYPE menu, select FHA Forward for FHA loans
• In the LIMIT YEAR menu, make sure the correct date range is selected
• Click on SEND and you will get the loan limits

Have a question about how to find the loan limits? Call us at 303-345-3683.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Friday, August 26, 2011

How much are closing costs? 1%, 2%, 3%, 4%? Today's winning question by Cary Sanger of Your Castle Real Estate addresses that subject. Cary receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Cary's question is: Do you have a rule of thumb for closing costs based on a percentage of the purchase price if people want a general idea of what they will need in addition to their down payment?

Here's the answer: It is extremely difficult to estimate a percentage for closing costs without knowing all about the borrower and the property. Here's why.

Many of the closing costs are fixed costs, meaning they are the same regardless of how big the loan is. Some examples of fixed closing costs are:

Appraisal fee

Credit report

Underwriting fee

Tax certificate

Loan closing fee

Real estate closing fee

Title insurance fees

Recording fees

Other closing costs change depending on the size of the loan or the purchase price. Here are some examples of closing costs that change:

Origination fee (usually 1% of the loan amount)

State tax stamps

Still other closing costs depend on the individual property, the interest rate, the borrower's credit, or the closing date. Here are some examples:

Property taxes: depends on the property and the date of closing

Homeowner's insurance: depends on the property and the borrower's credit score

Pre-paid interest: depends on the borrower's credit score (which determines the interest rate), the loan amount, and the date of closing

Now let's see how these different fees determine the closing cost percentage. Let's assume a property sells for $100,000 and the fixed costs are $2,000. The variable costs (the costs that are different in every situation) will probably be low because the taxes and insurance will be low. Let's assume the variable costs total $2,500. Total closing costs would be $4,500, which is 4.5% of the purchase price.

Now let's assume we have a property selling for $500,000. The fixed costs would be the same - $2,000. The variable costs would be higher because the loan amount, the taxes, and the insurance would be higher. They might be $8,000. The total closing costs would be $10,000, which is 2.0% of the purchase price.

Even though the closing costs are $5,500 less for the cheaper house, the percentage is much higher than it is for the expensive house - 4.5% versus 2.0%.

It's always a good idea to have your lender (preferably us) tell you how much the closing costs are. Guessing based on a "rule of thumb" will give you an incorrect number most of the time.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Friday, August 19, 2011

There's no doubt that the underwriting guidelines for mortgages have gotten stricter over the past few years. Today's winning question by Phyllis Ursetta of Integrity Realty addresses that subject. Phyllis receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Phyllis's question is: "Do you see any end in sight to the strict enforcement of the underwriting guidelines, specifically, the requirement that a buyer have 20% down to buy an investment property, even though they have very high credit scores, excellent income, and plenty of money in the bank?"

Here's the answer: There probably won’t be a change to the stricter guidelines that are in place for conventional loans for quite a while, especially for investment properties. Investment properties have a significantly higher foreclosure rate than primary residences.

Fannie Mae actually only requires a 15% down payment for investment properties, but they also require mortgage insurance for any loan that is greater than 80% of the value (or sales price) of the property.

The problem is that the mortgage insurance companies refuse to insure investment properties, so the end result is that you need 20% down. If a loan has mortgage insurance and that loan goes into foreclosure, then the mortgage insurance company has to write a check to the lender. The mortgage insurance companies are losing millions of dollars right now and they have no desire to lose more, so they have all said they will not insure investment property loans. No mortgage insurance = 20% down.

Regarding the qualifications of the buyer, the days of loan decisions being made on an individual basis are long gone. It really doesn't matter if a borrower is incredibly well-qualified. As long as they are buying an investment property, they get lumped in with all the other people who want to buy investment properties. Unfortunately, many of those people do not pay their loans back, and everyone has to abide by the stricter underwriting guidelines.

Things will change when the foreclosures stop. That is going to take a long time.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Monday, August 15, 2011

People continue to rave about our mortgage and credit classes. We've helped hundreds of people over the past few years learn more about loans and how to qualify for them. Attend a class yourself and see why people love them!

Following is a list of our upcoming classes. All are held at the Lowry campus of Colorado Free University (near 1st and Quebec). Call CFU at 303-399-0093 to register.

How Not to Get Ripped-Off When Buying a House. Learn about loan fraud, interest rates, where the money comes from to fund your loan, why loans get sold, and everything else about mortgages. Next class is Tuesday, August 16, from 6:30 PM - 9:30 PM. This class is free, but you must register.

Get Your Home Loan Approved!: FAQ's and Secrets of Mortgage Underwriting. In this class, we'll tell you all the things that no one else will, and we'll answer ANY questions you have about getting a loan approved. It's our newest class and is already a hit. Next class is Wednesday, August 17, from 6:30 PM - 9:30 PM. This class is free, but you must register.

Understanding Your Credit Score. Everything you wanted to know about credit reports and credit scores. We'll tell you exactly what to do to get the highest credit scores and how to keep them high. Credit repair companies HATE this class because you'll never again have to waste money paying someone to "repair" your credit if you attend. Next class is Tuesday, September 13, from 6:30 PM - 9:30 PM. This class is $41 for non-members and $29 for members of Colorado Free University.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Friday, August 12, 2011

Everyone is talking about the S&P credit downgrade, and today's winning question by Lise LeBlanc of Keller Williams Executives Realty deals with that subject. Lise receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Lise's question is: "How would you explain in simple terms to a first time home buyer the effects the downgrading of the AAA debt rating will have on their new mortgage apart from rates possibly increasing? How much time will they have before rates start going up? What can they do now?"

Here's the answer: Mortgage rates depend on how the mortgage backed securities bond market is trading. If there is a big demand for mortgage bonds, then the rates go down. If there is not a big demand for mortgage bonds, then rates go up.

The biggest purchasers of US mortgage bonds are foreign governments: China, Japan, etc. These foreign governments have lots of cash they must invest in something because they want to earn a return on their money. Mortgage bonds, because they are backed by the US government, are considered to be very safe investments. If the foreign governments did not invest in mortgage bonds, they would have to invest in something else. The alternatives at the moment are not very good, so the demand for mortgage bonds is very strong, which keeps rates low.

The economic situation in Europe is horrible right now, so no one wants to buy Euro bonds. The situation in the rest of the world is not very good, either. So despite the S&P downgrade, US Treasury bonds and US mortgage bonds are still just about the safest investment anyone can make.

It is impossible to say how long rates will stay low. Anyone who tells you that they know where rates are going is just making it up. If they really knew where rates were going, they would not be dispensing mortgage advice. Instead, they would be billionaire bond traders living the high life on Wall Street.
The important thing to keep in mind when talking about interest rates is that macro-economics (the world economy) determines where rates are going. As long as the rest of the world is worse off than the US, rates will stay low. At the moment, the US economy is as good as it gets.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Monday, August 8, 2011

We received a very big response to our email tip last week suggesting that agents explain the basics to their prospects and clients. In order to help out a bit more, here is an additional question that buyers often ask us.

Is the earnest money part of the down payment?

Here's how to answer that question. "Yes, the earnest money deposit you make when you submit an offer is part of the down payment. You pay the earnest money to show the seller that you're serious about the offer. If they accept your offer, the earnest money is subtracted from the amount your lender requires as a down payment."

Answer that question before your clients and prospects ask, and watch the trust build.

And don't forget to tell them:

It doesn't cost a buyer anything to use a real estate agent.

Any agent can sell any house. You don't have to use the agent whose name is on the sign.

Most of your competition is NOT telling their clients these things - that's why they are always asking us.

Despite what you may have read or heard, knowledge is not power. SHARING knowledge is power. Share your knowledge of the real estate business with your clients and prospects. They really don't know the answers to the basic questions we all assume they know.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Tuesday, August 2, 2011

This week's winning question was submitted to us by Ed Coulter of Vista Homes Real Estate. Ed receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Ed's question is: "What is the best web site to look at for real-time interest rates?"

Here's the answer: There really is no good site for real-time loan rates, and here's why. Rates are posted on thousands of web sites. However, there are many adjustments to the rates that are never shown to the public. These adjustments are known as "loan level pricing adjustments" and they can affect the interest rate tremendously - sometimes by as much as a few percentage points.

Unless a lender asks a borrower for all of this information (and much more), they can't possibly provide an accurate quote. The web sites that list rates (real-time or not), are either lead-generating web sites that sell the borrower's contact information to multiple lenders, or bait and switch sites intended to get the borrower to call. All the large lenders, and many smaller lenders, employ these tactics to get customers.

The very best way to get an accurate rate quote is to use lenders who tell you that they cannot possibly give you an accurate rate quote without gathering the information listed above and more.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Wednesday, July 27, 2011

Many buyers call us to get pre-approved for a mortgage before they begin their search for a real estate agent. Here are the two most common questions they ask us.

• How much does it cost me to hire a real estate agent?

• Do I have to use the real estate agent who is selling the house?

Of course, the answer to these questions is obvious to anyone in the real estate business, but it is incredibly important to remember that your clients are NOT in the real estate business. They really don't know the answers to these questions.

Truly successful agents constantly remind themselves that their clients and prospects usually don't know basic information. Whoever provides the most value to a prospect will get the deal. Be the person who provides the most basic information and deals will come your way.

Many years ago, I used to sell furniture. I closed an incredible number of wooden table sales by saying to the customers, "Hey, did you know this table is made out of wood?" Some of them laughed, but many of them bought from me because they said I was the first one to tell them the basic information they wanted.

So tell your prospects that it costs the buyer nothing to use a real estate agent, and that any agent can sell any house. You'll get more deals!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Tuesday, July 19, 2011

This week's winning question was submitted to us by Jani Bielenberg at Bielenberg & Associates, Metro Brokers. Jani receives a $25 gift card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Jani's question is: "We recently received a "Pre-Qualified" lender letter for a Buyer on one of our listings. On the loan conditions deadline, we received notice that the Buyer was not approved for the loan. The reason being, the Buyer was retired and the part-time job/salary could not be used because it only had a 6 month history, even though it was in the same field of work. Everyone involved in the transaction was disappointed to say the least. How could a "Pre-Qualified" letter have been issued knowing upfront that this would very likely be an issue? No disclosure was made. What is the workaround when the Buyer's lender is not a company that you recognize?"

Here's the answer: The buyer probably had too long of a gap in employment from the time he retired until he started the part-time job. If the gap were only a month or two, then an underwriter might accept the income from the part-time job.

A good loan originator will ask enough questions when he qualifies a borrower to make sure he's not making a mistake like this. Unfortunately, many of us are not trained very well when it comes to interviewing people. If someone has retirement income and also income from a job (whether it’s part-time or full-time), the lender needs to dig a bit deeper with his questions. Once he has all the information, he should then call an underwriter if he is still not 100% sure that the borrower will be able to get a loan.

I am guessing on this, but I would say that the lender never had a clue that it would be a problem. Even though we need to be licensed and pass a test to be an originator, anyone who spends more than a few minutes studying for the test can pass the test. It is hardly a good measure of how competent someone is. It is entirely possible to be licensed as a mortgage loan originator and not know much of anything about mortgages. It looks like you got stuck with someone who is not very good at his job. The real tip-off that they are not good is that they waited until the very last minute to tell you. As lenders, we know pretty early in the game whether a loan is going to have problems or not. If it is, then it is our responsibility to alert everyone as soon as we know about the problem.

As far as the workaround when the buyer’s lender is not a company you recognize, your best bet is to call the lender who wrote the letter as soon as you receive a letter (before you accept an offer), and ask them if they ran the loan through the online underwriting software that Fannie Mae, Freddie Mac, FHA, and VA provides to lenders. Also ask them if they checked the lender’s underwriting overlays (the additional guidelines that many lenders add on top of Fannie, Freddie, FHA, and VA). And finally, ask them if they checked the mortgage insurance underwriting guidelines. If they don’t answer YES to all three of those questions without hesitation, then you are probably not dealing with a very competent lender. Using the underwriting software and manually checking the lender and mortgage insurance guidelines is the absolute minimum amount of work an originator needs to do before writing a pre-approval letter. A good lender never minds answering a listing agent’s questions, so make sure you call the lender when you receive a pre-approval letter.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Thursday, July 14, 2011

This week's winning question was submitted to us by Nancy Woodson at Metro Brokers Denver Home Real Estate, Inc. Nancy receives a $25 gift card and gets her contact information sent to the 6,600 people on our contact list. Her contact info follows:

Nancy's question is: If a buyer has locked in the interest rate for a short sale transaction, and the deal is taking longer than expected to close, does the buyer have to pay for a rate lock extension? Are they obligated to use the original lender, or can they switch lenders to avoid the lock extension fee? Would they incur any fees if they switched lenders?

Here's the answer: Each lender has different rules for when the interest rate lock expires. Some lenders will allow the rate to be re-locked with no penalty (provided the current rate is the same or lower than the old rate). Other lenders will force the buyer to pay for a lock extension, unless the rate lock has expired for a minimum period of time (usually 30 days).

Under NO circumstances is the buyer obligated to use the original lender. A buyer is NEVER obligated to use a lender until they have signed the last piece of paper at the closing.

If the buyer decides to change lenders, they do not have to pay the lender anything except the exact costs for third-party fees incurred by the lender (appraisal, title work, etc.). If the buyer decides to change lenders and the loan fails to close through no fault of the lender, then the buyer may have to pay up to $300 to the lender for preparation work performed.

Regarding these fees, we don't know any title company that charges for loans that don't close, and no lender with any good business sense at all will charge a buyer $300 if a loan doesn't close. Appraisers expect (rightfully so) to be paid for the work they perform. It is always wise to ask the new lender if they will accept the old appraisal, saving the buyer the cost of two appraisals.

The bottom line is that a lender should do everything possible to explain to a buyer why locking an interest rate on a short sale transaction is a horrible idea until the short sale approval is obtained from the seller's lender. We do many short sale transactions and have never had a problem with rate locks because we explain that short sales take more time than everyone would like. Locking a rate when you don't know the closing date is just silly (and very bad business).

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Monday, July 11, 2011

Most lenders require a 640 credit score these days for FHA loans. We can do FHA loans with a 620 credit score and only 3.5% down.

Don't have a 620 score? Then give us a call. We will tell you exactly what to do to raise your scores. Oh yeah - we will tell you what to do for free! All you have to do is pay for the credit report ($25 for a single borrower and $30 for a couple). Then we run your credit report through software provided by the three credit bureaus, and it tells us exactly what you need to do to raise your scores. We have been doing this for more than 3 years now, and about 50% of the people listen to us and buy a house. The other 50% don't listen to us, end up getting ripped off by a credit repair company, and keep renting.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Tuesday, July 5, 2011

Real estate agents are always asking us questions. That's a good thing. Now it gets even better!

Email us a question about mortgages. If we choose your question, we'll answer it in our next email newsletter, ANDwe'll deliver a $25 gift card to you as a way of saying "Thank You" for helping to expand the knowledge base of our local real estate industry.

If you'd like, we'll also include your name and contact information in the newsletter, which goes to 6000 real estate agents and 600 of our past clients and current prospects.

So here's what you get, just for asking a question about mortgages:

$25 gift card - delivered to you personally.

Your name and contact information sent directly to 6000 local real estate agents and 600 of our local clients and prospects.

The correct answer!

A chance to help expand the local real estate knowledge base.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Monday, June 27, 2011

At this time of year, with many people recently graduating from college, we are often asked, "How long do I need to have a job to get a mortgage?"

If you have just graduated from college, and your new job is related to the degree you earned, then all you need is one pay check to get a mortgage. The time you spent in school counts towards the standard 2-year employment history requirement.

If you have specific questions regarding employment length, don't assume you can or cannot get a loan. Instead, call us, The Mortgage Experts, and we'll be more than happy to answer any questions you might have.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Wednesday, June 22, 2011

I ran my first marathon in 1980. I ran 3 last year. I ran a number of them in between 1980 and last year. I have NEVER run fast enough to qualify for the Boston Marathon.

On the other hand, Debbie, my amazing wife and business partner, ran her first marathon in San Diego this month and DID qualify for the Boston Marathon. There were 32,000 people in the races (full marathon and half marathon) and she came in 15th in her age group for the full marathon!

Good thing I like fast women, because I'm certainly married to one!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Fannie Mae is trying to sell houses again, and they're making it easier for buyers and for real estate agents.

If you submit an offer for a Fannie Mae HomePath property and close by October 31, 2011, Fannie Mae will pay up to 3.5% of the purchase price towards the Buyer's closing costs, which should be enough to cover them all.

They will also pay the selling real estate agent a $1200 bonus.

HomePath properties are pretty good deals. Here's why:

• No appraisal is necessary
• There is only a 3% down payment
• There is no mortgage insurance

Thursday, June 2, 2011

Fannie Mae has just tightened their underwriting guidelines regarding the use of retirement accounts as reserves.

Borrowers are sometimes required to have reserves to get approved for a loan. Reserves are funds that the borrower has left over after paying for the down payment and closing costs. 60% of the vested amount in a retirement account can be used as reserves. That is not a change from the former guidelines.

However, the new guidelines state that if the borrower is only allowed to withdraw money from the retirement account because of employment termination, retirement, or death, then none of the money in the retirement account can be counted as reserves.

This is important to know because the underwriting software used to issue pre-approvals does NOT determine whether the money in a retirement account can be counted as reserves. If the lender pre-approving your client doesn't check to see if the reserves can be counted before using the software, the pre-approval may be invalid.

One more reason to use a great lender like us!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Tuesday, May 24, 2011

It's a gloomy day. Why not spend a few hours this evening learning how loans REALLY get approved?

We've got a few spots left in the underwriting class being held tonight at Colorado Free University: Get Your Home Loan Approved!: FAQ's and Secrets of Mortgage Underwriting.

Imagine if all the frustration surrounding loan approvals disappeared. No more sweating it out wondering what the lender (and the ever-so-mysterious underwriter) were doing. We'll explain exactly how a loan is underwritten. There's no reason at all that anything involved in mortgage approvals should be "secret", so we're going to tell you how it all works.

The class is free. All you have to do is register for the class at Colorado Free University. Their number is 303-399-0093.
The class is tonight, Tuesday, May 24,and will run from 6:30 PM - 9:30 PM. It will be at the Lowry campus of Colorado Free University (near 1st and Quebec).

Come and learn. You will be glad you did.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Here's all you need to know about getting a mortgage for an investment property:

1. If you are buying a 1-unit investment property, you need 20% down. Fannie Mae underwriting guidelines say you only need 15% down. However, you also need mortgage insurance if you have less than 20% down, and no mortgage insurance company is willing to insure an investment property. You need the full 20% down to avoid the mortgage insurance.

2. If you are buying a 1-unit investment property and you put 25% down, the rate will be cheaper. The difference in the rate depends on the day you lock the interest rate, but it will always be less if you put the extra 5% down.

3. If you are buying a 2-4 unit investment property, you need 25% down.

That's it. Investment property loans are as easy to get approved as anything else. Use a good lender and it goes very smoothly.Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Did you know that Debbie and Chris Thomas, The Mortgage Experts, have each been awarded the prestigious 2011 FIVE STAR Mortgage Professional designation by 5280 magazine? That makes us a TEN STAR team! 50,000 recent home buyers ranked both of us in the top 5% for overall customer satisfaction and mortgage knowledge. Want to be satisfied when you get a mortgage? Call The Mortgage Experts.

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

There are two distinct things that must be approved before a lender will give a borrower any money to buy a house: the borrower and the property.

Getting the borrower approved is easy. Collect the right information, run it through the underwriting software, and send everything to underwriting to make sure the borrower's information was entered into the software correctly.

Getting a property approved is a bit more complicated. First, the appraisal must show that the property is worth what the buyer is paying for it. The appraisal must also show that the property is marketable. The lender cares about marketability because they want some kind of assurance that they will be able to sell the property quickly if the borrower goes into foreclosure.

Lenders want a property to appeal to the largest possible pool of potential buyers. If a lot of people want to buy a house, it is considered "marketable".

Here's a good example of how a house might not be marketable. A dome house might be cool to look at, and it might be worth a lot of money, but not too many people want to live in one. A dome house is not very marketable, and it is extremely hard to get a loan for one.

The same goes for houses with other unusual designs, zoning restrictions, or those without adequate utilities or year-round access.

Marketability is as important as value!

Did you know that Debbie and Chris Thomas, The Mortgage Experts, have each been awarded the prestigious 2011 FIVE STAR Mortgage Professional designation by 5280 magazine? That makes us a TEN STAR team! 50,000 recent home buyers ranked both of us in the top 5% for overall customer satisfaction and mortgage knowledge. Want to be satisfied when you get a mortgage? Call The Mortgage Experts.

Monday, May 2, 2011

5280 magazine notified Debbie and Chris that they have been awarded the designation of FIVE STAR Mortgage Professional for 2011.

A survey of nearly 50,000 recent home buyers was conducted, and Debbie and Chris were each ranked in the top 5% of all mortgage professionals in Denver, based on overall satisfaction, mortgage knowledge, and the willingness of those surveyed to highly recommend them to their friends.

Does that make us a TEN STAR team? We think so!

This presents a HUGE opportunity for Colorado real estate agents. When you refer your clients to The Mortgage Experts, you are referring your clients to a team that is recognized by home buyers - YOUR client base - as being the best. When your clients are satisfied - and they certainly are when you refer them to us - they will refer more business to you. Referring clients to us means more money in YOUR pocket.

If you are in the market for a mortgage yourself, why not get your loan from the recognized Mortgage Experts?

Give us a call and join the winning team! 50,000 home buyers are extremely happy with what we do. You will be, too!
Make sure you check out our web site. It's a resource you shouldn't be missing. Here's the link:

Wednesday, April 13, 2011

Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through June 30, 2011, if they purchase a HomePath property. The buyer does NOT have to get HomePath financing to get the closing cost assistance.

The HomePath property buyer must meet the following qualifications to be eligible:

Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible.

The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive.

The sale must close on or before June 30, 2011. No exceptions will be made to this deadline.

Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive.

If a buyer's total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.

HomePath properties are properties that are owned by Fannie Mae after a foreclosure. If the buyer obtains HomePath financing, they do NOT require an appraisal, there is NO mortgage insurance, the minimum down payment is only 3% (can be from a gift), and condos have relaxed approval guidelines.

How would you like to get an inside look at mortgage underwriting? Now is your chance!
We've just added a new free class to our offerings at Colorado Free University: Get Your Home Loan Approved!: FAQ's and Secrets of Mortgage Underwriting.

Imagine if all the frustration surrounding loan approvals disappeared. No more sweating it out wondering what the lender (and the ever-so-mysterious underwriter) were doing. We'll explain exactly how a loan is underwritten. There's no reason at all that anything involved in mortgage approvals should be "secret", so we're going to tell you how it all works.
The class is for anyone who wants to know how to get their own (or someone else's) home loan approved. The mortgage industry is much, much different than it was a few years ago, and any agent who wants to maximize their income potential needs to know what happens once you turn your deals over to a lender.

The class is free. All you have to do is register for the class at Colorado Free University. Their number is 303-399-0093.
The next class is scheduled for Wednesday, April 27, 2011 from 6:30 PM - 9:30 PM. It will be at the Lowry campus of Colorado Free University (near 1st and Quebec).

You don't want to miss our other great real estate financing classes.

How Not to Get Ripped-Off When Buying a House (everything you wanted to know about loan fraud). Next class is Wednesday, April 20 from 6:30 PM - 9:30 PM. This class is free, but you must register.

Understanding Your Credit Score (everything you wanted to know about credit reports and credit scores). Next class is Tuesday, May 17 from 6:30 PM - 9:30 PM. This class is $41 for non-members and $29 for members of Colorado Free University.

All the really cool real estate agents send their clients to the video library on our web site. Here is the link:

Many credit repair companies advise their clients to dispute accounts on their credit report, telling them the accounts will be removed from their report. That is horrible advice. Here's why:

When you dispute a credit account, lenders are now required to underwrite loans manually, rather than using the software that allows higher debt-to-income ratios. If a borrower is approved for a loan by the software with a 50% debt-to-income ratio and they have disputed an account, the manual underwriting guidelines say that the debt-to-income ratio must be lowered to:

36% for conventional loans

41% for VA loans

43% for FHA loans

If you dispute an old, unpaid collection account, the collection company will now know you are trying to improve your scores, and they may start trying to collect from you again. Your credit scores will drop.

Never advise anyone to use a credit repair company. Everything you can possibly do to raise your credit score is available for FREE from The Mortgage Experts. Give us a call for the details.

We received a number of calls in the past few weeks from prospective home buyers who had been told by various lenders that they were unable to qualify for a mortgage because their debt-to-income ratios (DTI) were too high. Most of them had been misinformed.

Here are the real debt-to-income ratio numbers:

FHA loans do not have a maximum DTI ratio. With good credit, borrowers are commonly approved with a DTI of 50% or slightly higher.

VA loans do not have a maximum DTI ratio. With good credit, borrowers are commonly approved with a DTI of 50%.

Conventional loans have a maximum DTI of 50%.

Check out the video library on our web site for more detailed information on DTI ratios. Here's the link:

Monday, March 28, 2011

Some title companies are now requiring buyers to wire funds to their office if the funds due at closing exceeds a certain amount. In the past, just about every title company allowed buyers to bring a bank check. If your buyer doesn't know about this, it could delay the closing because it sometimes takes a few days to arrange for a wire.

Not every title company has this new requirement, but it's certainly worth asking about.

Thursday, March 24, 2011

HUD stands for the Department of Housing and Urban Development. HUD is the US government agency that oversees the FHA loan program.

A HUD home is a house that used to have an FHA mortgage, but it went into foreclosure. HUD now owns the property.

How to Buy a HUD Home

• HUD homes are sold by bidding on them.• HUD lists a sales price on their web site, but you can bid more or less than the price listed on the web site.• You must use a real estate agent to place the bid for you.• Not every real estate agent is signed up with HUD to place bids, but it is very easy and quick for them to do so.

• Occasionally, HUD will offer special programs so they can sell HUD homes faster.• Some examples: HUD homes for $100 down, closing costs paid by HUD, special incentives to real estate agents.• Check the HUD home web site for details and to see if any specials are in effect now.

Financing a HUD Home

• HUD will accept any type of loan or cash for one of their properties.• If the financing is going to be an FHA loan, the web site listing will tell you which types of FHA financing are available for that particular property.

Common Misconceptions

• You do NOT need to get FHA financing to buy a HUD home.• HUD homes are NOT just for first-time home buyers. Anyone can buy a HUD home.• An individual CANNOT buy a HUD home for $1 down. That program is reserved for non-profits and government agencies.• NOT all HUD homes are destroyed. Some are in good shape and some are in bad shape, just like other properties.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Sunday, March 6, 2011

Here's what you need to know about using various types of miscellaneous income to qualify for a mortgage.

Alimony or Child Support

• A divorce decree or other legal document must show that the income will continue for at least three years• Must document that full, regular, and timely payments have been made for the past 12 months• 6-12 months is acceptable, provided the alimony or child support is not more than 30% of the total income used to qualify the borrower

Capital Gains Income

Only acceptable if the borrower can document the following:• Capital gains income has been received for the previous two years – income tax returns are required. The income is then averaged over the past two years.• The borrower must document that they have additional property or assets that can be sold to pay the mortgage

Disability Income

• If the income will continue for at least three more years, it can be counted• If the borrower is currently receiving short-term disability, which will be converted to long-term disability in the next three years, and the payments will decrease, the lower, long-term payments must be used

Income from Employment-Related Assets

• Examples: 401(k), IRA, SEP, and KEOGH retirement accounts – income is NOT being withdrawn• The assets must be available for withdrawal without penalty – borrower must be old enough to withdraw• The assets must be owned individually by the borrower, unless the only other owner is the co-borrower• Only 70% of the assets can be counted• Income is calculated as: total assets x 70% / 360• Example: $500,000 in assets would be calculated as $972 per month in income500,000 x 70% / 360 = 972

Retirement, Government Annuity, Social Security, and Pension Income

• Must document that the income is being received – W-2’s or 1099’s, retirement award letter, etc.• Must document that the income will continue for at least three years

Foreign Income

• Must have been received for the previous two years• Must be converted into US dollars

Foster Care Income

• Must have received the income for the previous two years as shown on tax returns• 12 months is acceptable if the foster care income is not more than 30% of the income used to qualify the borrower• Must document that the income will continue at a level high enough to qualify for the mortgage

Interest and Dividend Income

• Must show that interest or dividend income was received for the previous two years• Income is averaged over the past two years• Must show that it will continue for at least three years

Non-Occupying Co-Borrower Income

• Example: parents buy a condo for their child – often referred to as a “kiddie condo” loan• Income from the non-occupying co-borrower is allowed for FHA loans• It is not allowed for conventional loans, unless the occupying borrower can qualify by themselves, without the income

Tip Income

• Must document that the income has been received for the previous two years• The tip income is averaged over the previous two years• The borrower’s employer must state that the tip income is likely to continue

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Low Interest Rates, Low Closing Costs, and our loans close!

2011-2015 FIVE STAR Mortgage Professional Award Winners

Here's What People Are Saying About Us

"I always turn to Chris and Debbie to secure mortgage financing for my buyers because I rely on their unending commitment to customer service and their vast knowledge when it comes to mortgages. I recommend them to anyone - without even a moment's hesitation - they are simply amazing."

"Every transaction that Debbie and Chris have been involved with has closed on time with no issues. It’s no wonder 5280 Magazine has designated them an award winner. The buyers have been pleased with their professionalism and their willingness to go the extra mile. They are patient and willing to work with potential buyers who have credit issues. A pleasure to work with."

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